Modi’s government is moving towards privatising the country’s Airline.

  • Finance Minister Arun Jaitley and his Civil Aviation counterpart Ashok Gajapathi Raju  discussed the future course for debt-ridden Air India, with senior officials indicating that a decision on privatisation will be taken within three months.
  • NITI Aayog, an government policy advisory group chaired by prime minister Narendra Modi, has given its recommendations to the civil aviation ministry which will decide on the process of disinvestment in Air India.
  • Air India is inefficient and unable to compete with private sector airlines, it has been mismanaged over years by the government.
  • Ashok Gajapathi Raju, the civil aviation minister, has also suggested Air India to be sold.
  • Debt restructuring would be one important component of the process,” the official said, adding that Air India has been talking to banks for the last 4 -5 months.

Reasons behind the decision

  • Infusion of equity capital (Around Rs 40,000 crore) by government in period of 20 years from 2011-12 had also set targets for monetization for airlines assets. But it has not been able to raise even 10% of those targets
  • It has not been able to meet the operational targets. The company has accumulated debt of about Rs50,000 crore and is struggling to repay.
  • This will also set an example and pave the way for disinvestment of other loss-making companies, such as Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL).

Possible Solutions

  • The government can infuse equity capital one last time to bring down the debt and make it attractive for potential buyers.
  • Hotel Corporation of India can be sold to reduce debt.
  • The government should not be in the business of providing goods and services where the private sector has a vibrant presence.
  • The Government can also sell a minority stake in the company and bring in a professional management.

Benefits of this Decision

  • The government can  spend more in important areas such as health and education.
  • In Past many non profit making PSU has been shut down to save money and invest in required areas.

 

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